Samsung Group Heir Jay Y. Lee Is Arrested on Bribery Allegations

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Samsung Group's Jay Y. Lee was formally arrested on allegations of bribery, perjury and embezzlement, an extraordinary step that jeopardizes the executive's ascent to the top role at the world's biggest smartphone maker.

The Seoul Central District Court issued the warrant for Mr. Lee's arrest early Friday. Including procedural steps and appeals, it may take as long as 18 months for a trial and verdict. The decision was made because of the risk that he might destroy evidence or flee, a court spokesperson said.

Investigators are looking into whether the vice chairman of Samsung Electronics Co. was involved in providing as much as $38 million to benefit a close friend of South Korean President Park Geun-hye, in exchange for government support of his management succession. Prosecutors allege that Mr. Lee, 48, funded Ms. Park's associates as he tried to consolidate control over the sprawling conglomerate founded by his grandfather.

Mr. Lee, who had been waiting for the court's decision at a detention center in Seoul, will remain there as a result of the arrest warrant. The court rejected the prosecutor's request to arrest Samsung Electronics President Park Sang-Jin. With Mr. Lee under detention, Mr. Park will probably assume some of Mr. Lee's responsibilities.

"We will do our best to ensure that the truth is revealed in future court proceedings," Samsung Group said in a statement. The shares of Samsung fell less than 1% in early trading in Seoul. Prior to the arrest, the stock had climbed 5.5% this year, following a 43% rally in 2016.

After the prosecutor's first attempt to arrest Mr. Lee was rejected by a court on Jan. 19 due to lack of evidence, the billionaire heir was called in again for 15 hours of questioning on Monday as investigators sought more information. In their second attempt, a spokesman for the special prosecutor said Tuesday that they found evidence of Mr. Lee concealing profit gained through criminal acts and hiding assets overseas.

Samsung has denied it made an unlawful offer or paid a bribe to the president in exchange for favors. The conglomerate's transition to a new, younger leader was already marred by last year's botched debut of the Note 7, a smartphone that was discontinued after it showed a tendency to catch fire and explode.

Mr. Lee has been the de facto head of Samsung with his father Lee Kun Hee hospitalized since 2014.

The Samsung probe is part of a broader investigation into contributions that dozens of Korean companies gave to Choi Soon-sil, a confidante of President Park. The scandal has rocked South Korea with millions of people taking to the streets in protest. President Park has been impeached and her powers suspended. A separate constitutional court will determine whether she is ultimately removed from office, another tumultuous chapter for a country that became a full-fledged democracy in 1987.

When he testified at a parliamentary hearing in December, Mr. Lee said he never ordered donations to be made in return for preferential measures and rejected allegations he received wrongful government support to push through a merger of two Samsung affiliates in 2015. Still, Lee, who has been put under a travel ban, confirmed he had private meetings with Ms. Park and that Samsung had provided a horse worth $873,000 that was used for equestrian lessons by Ms. Choi's daughter.

-Bloomberg News

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